7 Things I Learned About Credit From Ruining My Own

February 25, 2015

As I have addressed here from time to time, I ruined my credit pretty early in my life. I got a card at 18 (this was just pre-crash, when handing a teenager a bunch of fun money seemed like a good idea), and maxed it out within weeks. I never even entertained the idea of paying my bills, and went about my life as red flags and late notices accrued in my parents’ mailbox. Eventually they turned into collection calls, and religiously avoiding unknown numbers became as natural to me as tying my shoes. I treated my manageable-but-unfortunate pile of credit card debt (only 500 dollars initially, which eventually became over twice that with interest), as a nuisance to be avoided, like a fly at a picnic.

Still, as dumb as I was about my Visa, I wish my credit illiteracy had stopped there. I wish I could say that that was the beginning and end of torturing myself with my inability to pay bills. But looking back, I now consider my entire life from the ages of 18 to 22-ish to be a financial Bog of Eternal Stench. I accrued small debts like you wouldn’t believe — parking tickets, moving violations (which I often didn’t pay, which eventually led to me getting arrested for driving on a suspended license with suspended tags), tiny student loans, and anything else I could be dumb about. I don’t have a degree to speak of, but I have about 8,000 dollars in (subsidized) student loan debt. This is negligible compared to a lot of people I know, but considering I have nothing to show for it, the number still stings. I could have gotten out with nothing, but I was dumb and preferred to take out loans instead of working more hours at my part-time job.

And the thing was, I was never a debter. I am not a shopping addict, I don’t hoard anything, and I was never going bank-to-bank trying to get credit (one card was more than enough). I was just lazy and dumb, and lived in this weird limbo where I deluded myself into believing that my debts would just go away. I pictured a distant future in which I was wealthy enough to pay them off all at once, despite having no degree or real job prospects. (Yes, I now know how ridiculous all of this sounds, and if you’ve never experienced that particular mentality, it’s hard to imagine.) Looking back, I wish I could punch myself in the face, because nothing I ever did felt even briefly worth it — I don’t even have a nice piece of clothing from my extended period of destructive financial YOLO.

It wasn’t until I got a real job (at 22) that I started considering the debts I had with any seriousness. My salary was humble, but still enough that I could squirrel away bill payments if I needed to, and as it was the first time I’d ever had a Big Kid Job, I felt a jolt of motivation to get my shit together. My first order of business was to take care of the credit card debt from a full four years ago, which had by that point bounced around from collection agency to collection agency and followed me through four addresses, including two in France. I was terrified to call them, but they were (as they always are, I now know) kind and welcoming and ready to do anything not to scare me off. We arranged a payment plan, and within a year, my credit card debt was gone.

And while I pay other things, I still have a lot of work to do, and even as a I drive down my debt, it will be a long, long time before I have a respectable credit score again. It’s a frustrating process, but in many ways, I am invigorated and motivated by the experience, and by watching that number slowly, painfully tick up. As I earn more money, I am more driven to save and pay, if only because I know what life looks like on the other side of that equation. I encourage you to do the same if your credit score is crappy (or non-existent, or unknown), because it truly improves every aspect of your life. And here, the seven most important things I’ve learned about credit and debt, if you are looking to embark on that journey.

1. Answering is ALWAYS better than avoiding. When you have a debt that you are avoiding, you tend to work yourself into a mild, sustained panic that prevents you from taking any action, as you imagine the company/bank/government on the other end is going to scold and embarrass you like an exhausted parent. But their job is very simple: get money out of you, by any means necessary. And the easiest way to mess that job up is to make you feel scared, alienated, or embarrassed. So they are incredibly sweet, patient, and forgiving, and make no mention of the fact that they’ve been trying to get a hold of you every day for the past two months. They do their best to make the conversation feel calm and productive, and are not there to yell at you about the past. They know that if they’re having to collect on something, it’s because you wouldn’t (or couldn’t) pay it, and hashing out the specific reasons why is not going to help anyone. So call, because it won’t be unpleasant.

2. Bad credit makes you a permanent child. Nothing is more humbling — no matter what you have accomplished in life — than having to accept your overwhelming financial untrustworthiness in front of authority figures. I’ve had a book on bookshelves across the country while sitting, humiliated, in front of a banker who had to tell me that I was only eligible for the 300 dollar-limit “rehabilitation” credit card, because the bank couldn’t trust me not to run it up and default on my debt again. Paying that measly card on time every month for the past 15 months has been a satisfying and ultimately positive experience, but it certainly stung to accept that it was my fate. I’ve been rejected for several things that I should have been eligible for, once even in line in a crowded Banana Republic (!), and the experience never gets less shitty. But accepting that the world is going to treat you with training wheels and condescension is just part of accepting your crappy credit, and the sooner you get over yourself, the sooner you can work on changing it.

3. It doesn’t matter how much money you earn. I have been qualified, financially, for a lot of things that I couldn’t get because of my credit. Even now, when I earn more on paper than I ever have in my life, I couldn’t put myself on a lease for which I earn more than 40x the rent. It doesn’t matter if I have the bank statements, or an earnings letter from a CPA, or even my tax forms. It matters that they don’t think I’m going to stop paying rent one day and move to Buenos Aires, which right now could very well be my case. I luckily have several people in my life who trust me and have stellar credit, so I’ve been able to get around it, but that fundamental lack of independence is a rough reality to accept. If I want things myself, I will have to pay cash for them, at least for the time being.

4. Negotiate, negotiate, negotiate. Here’s a secret I have learned in my (sadly) extensive experience with debt: Something is always better than nothing. If you can only pay a certain amount, hold firm (but kind) with the person on the phone and explain your situation. Say you want to pay, and give the amount you can realistically commit to (because a lot of times their automated estimates are way, way off), and don’t waver until they meet it. Pretty much without exception, I have done this for my debts, and I’ve always paid once we met the right number. Sometimes it takes a few phone calls, and a bit of time, but once it’s clear to the organization that you are not going to do more, they will take what they can get. They just want to get that money, and they will eventually work with you.

5. Bad credit creates power imbalances in relationships. With parents, with roommates, with significant others. It doesn’t matter if they won’t take advantage of you, or lord something over your head, or decide not to help you. The point is that you don’t have the power, or the choice. I trust all of the people in my life implicitly and endlessly, but having to go to one of them and ask them to sign on a dumb medical thing so I can pay monthly instead of in one giant chunk is not fun, and creates a palpable feeling of inequality.

6. Don’t pay off everything without saving. You have to prioritize your debts based on interest rates, your current income, your savings, and your day-to-day life. I have very low-interest student loans for example, so I will not pay the maximum that I could, because I am in the process of saving a comfortable, necessary emergency fund. Once I have six months’ worth of living costs saved and put away, I can and will pay more, but for now — particularly starting my own business — saving is a priority. And I will never put all of my money into bills and none into savings, no matter my situation. Rehabilitating your credit and paying down debt should never come at the expense of your personal safety net, nor should it decimate your ability to save.

7. Nothing gets better until you acknowledge it, and own it. I used to be all secretive and squirrely about my terrible history with credit and debt, for a wide variety of reasons: It’s not attractive, it’s embarrassing, we are really hush-hush about money in our society, I thought it would make people judge me professionally, I didn’t want people to think I was a spending addict, etc. But once I accepted the truth about my history, and the things I would need to do to change it, it felt like an incredible weight had been lifted from my day-to-day life. Yeah, I have bad credit. Yeah, I was really bad with debt for a while. No, it wasn’t as bad as it could have been, but it’s my reality, and only getting worse by my refusal to acknowledge it. Not paying close attention to my finances allowed me, without ever spending that much, to shoot myself in the foot repeatedly and squander any attempts I made to save.

Now I own it. I never dodge a call, I never lie about my situation, and I never attempt to get around the system. I have no problem saying “my credit isn’t great, so I will be using a cosigner” for something, or acknowledging that I have student debt despite having no degree. It’s not ideal, no. But it’s my life. And my money. And at the end of the day, I would much rather live honestly and well, even if some people will judge or dismiss me because of it. Because their opinions don’t appear on my bank statement.